Metered Access

Crain's Detroit Business is a metered site. Print and digital subscribers have unlimited access to stories, but registered users are limited to eight stories every 30 days. After viewing three metered stories, you'll be asked to register or log in. After eight more stories in 30 days, you'll be asked to subscribe.

Photo by COURTESY MASSAGE GREEN SPA
Allie Mallad, founder of Massage Green Spa, says, "I'd rather have someone with a great attitude than great skill. I can teach skill; I can't teach attitude."

Allie Mallad knows a few things about starting a business. He should, since he's done it a few hundred times.

Mallad's current enterprise is Massage Green Spa, a Southfield-based therapeutic massage franchising business. Since its launch in 2008, the chain has grown to 50 stores, half of them corporate-owned. He expects the number to double by the end of this year.

The jump to becoming a franchisor followed a big run as a franchisee — Mallad owned 171 stores under seven national franchises at one point in the 1990s. His base was his Little Caesars operation, for which he owned 159 stores at its peak in 1995. Operating out of Southern California at the time, he also owned stores for chains such as Bruegger's Bagels, Applebee's, Baskin-Robbins and Jiffy Lube.

He's been the franchisee and the franchisor, the startup guy and the guy helping the startups. One of the biggest mistakes he's seen, and experienced, stems from personnel management. New business owners better get ready to work on this for a long time to come.

"I'd rather have someone with a great attitude than great skill. I can teach skill; I can't teach attitude," he said. "The biggest mistake I've made is choosing the wrong people."

Chicken or beef?

It all got started when Mallad was working as a flight attendant for Delta Air Lines in the 1980s. A former basketball player at Central Michigan University, Mallad still had dreams of playing professionally and wanted to be close to superstar athletes. He got himself promoted to working the first-class end of the planes but ended up talking more with businesspeople than athletes.

Mallad would ask them why they wasted their money just to get a few rows ahead of everyone else. They'd tell him that after attaining a level of success, a need for a certain quality of life kicks in.

"Well, I want to be part of that," Mallad thought, and he was off and running.

He used his savings of $50,000 and another $30,000 borrowed from his mother to open a convenience store in Lincoln Park in 1984. A year later, he had two more stores under his wing.

He began approaching chains like McDonald's, Burger King and Domino's for franchise opportunities, but they either wanted too much money or had onerous rules. Eventually, it was Mike Ilitch at Little Caesars who told him, "If you want opportunity, go west and I'll give you all the opportunity you can handle."

Six years later, Mallad owned 159 Little Caesars stores in California. An entrepreneur with an itchy trigger finger, he soon added a dozen other stores under different brands.

But he had ideas for being a franchisor, and eventually he decided he needed to give it a try. Seeing the success of Little Caesars' $5 "Hot-N-Ready" pizza deal, and also having been an avid fan of therapeutic massage since his days as an athlete, he saw an opening for a strong consumer value proposition in the world of massage.

He came back to Michigan and opened Massage Green Spa with the idea that he could build a business through volume — lower the price, and more people would be willing to commit to a membership plan. Massage Green Spa's business works by having more people make commitments to monthly payments.

Mallad's first store opened in Dearborn's Fairlane Plaza — a small retail strip he owns — in 2008.

Members pay $39.95 a month and for that they get one massage visit. If they don't use it, it rolls over into the next month. Subsequent visits within a month cost $34.95.

Combined revenue for all 42 stores that were open last year was $13.4 million. About 15 stores opened in the last quarter of the year and more continue to be added to the chain, leading Mallad to expect revenue to double this year. Total revenue in 2012 was $5.5 million, which was more than double 2011 revenue.

The cost to open a Massage Green Spa store, according to the company's franchise disclosure document, ranges from $98,500 to $172,000, including a $45,000 franchise fee. The franchising entity is Southfield-based Massage Green International Franchise Corp.

The right questions

When asked what lessons he's learned from running so many stores, Mallad always returns to personnel management.

The tricky answer is that recognizing talent is a talent, and a necessary one for growing a business. He found it easier to operate 100 stores than 25, because at the higher levels he had the money to justify hiring people to run departments — as long as he was able to find the right people.

Honest compensation is key to that, but so is a careful interviewing skill, something he's learned over the course of hiring 10,000 workers throughout his career. He pays as much attention to tone and body language as to what interviewees are saying. And when it comes to senior managers, he checks on them in the months following their hiring to see if they're living up to the great things they said in the interview.

Spotting and retaining talent is an intangible skill and the source of frustration for many business owners, and it doesn't necessarily get easier with experience, as one example Mallad relayed shows.

At Massage Green, complaints started coming in from store managers about a district manager not long after this person was hired. The manager "was different in the interview than in the field," Mallad said.

The problem? The district manager was nowhere to be found much of the time. Requests from stores would go unanswered for nine days.

"A manager might have an incident and need advice from the district manager, and the district manager doesn't respond," Mallad said. The district manager didn't last much longer.

He's learned to cut his losses.

"Even now we make mistakes. There's no proven formula for hiring the right person. However, we can create a much better probability of hiring the right person if we ask the right questions and listen to the answers," Mallad said.

Staying prepared

John Bornoty, owner of small Grosse Pointe Woods-based restaurant chain The Big Salad LLC, is newer to the business. But he's faced the same issues Mallad has and said anyone in any business almost certainly will.

"Our frustration is just finding good people — good managers, good salad chefs, people who just care," Bornoty said. "I have friends in the corporate world who can pay six figures, and they have the same frustrations."

The issues dropped significantly when he began giving ethics assessments to prospective employees. The tests are not 100 percent accurate, and sometimes people who do poorly on the assessment but do well in the interview will be hired anyway, but it's a useful starting point, Bornoty said.

Lousy employees have a direct effect on sales in the retail business, and the wrong person can "infect your entire staff. It will make your better people quit," he said.

Larry Klimek runs Grosse Pointe Farms-based consultancy JKL Associates and is the guy who provides those assessments for Bornoty. People who start businesses tend to overlook the people side of the business in the beginning, as they come to the table thinking more about their concept and vision than finding the talent to manage it.

Personnel management requires constant attention through the life of a business, Klimek said.

"The reality is that it's not any different than sales. If you stop building a pipeline for sales, revenue dries up. The same mentality is needed for talent," he said.